Arrowhead Research Corporation’s (NASDAQ: ARWR) (“the Company”) President and Chief Executive Officer today issued the following open letter to the Company’s shareholders:

Dear Shareholders:

Our business strategy is dictated by the drive to build long-term value. For us, this means building businesses that address real opportunities in the marketplace with world-class science, high quality management, and capital efficient execution. We believe that by committing to building lasting value in this way rather than focusing on short-term market fluctuations, our shareholders will ultimately be rewarded. However, markets are not always efficient over narrow time intervals, and we view the recent pressure on our stock as the result of short-term market dynamics rather than an indication of a longer-term trend of diminished value. This perspective is informed by extensive real time information about how our businesses are performing and the feedback we are getting from potential partners and customers. Therefore, my goal today is to provide our shareholders with a view of what we see at Arrowhead and to offer some guidance for the last three months of the calendar year.

Let us start with an overview of some of Arrowhead’s accomplishments in the first half of the year that helped propel our stock to its 52-week high of $1.85 in June.

Interim data from Calando’s Phase I clinical trial was published in the prestigious scientific journal Nature, representing a significant event for Calando, Arrowhead, and the broader RNAi field. These data represent what we believe to be the first report in humans of: (1) definitive systemic siRNA delivery; (2) definitive gene silencing via the RNAi mechanism; and (3) dose-dependant accumulation of intracellularly localized nanoparticles of any kind. Effective systemic delivery of siRNA has been thought of as the “Holy Grail” of RNAi therapeutics, and our clinical data suggest that we are the first and only company to achieve this. Calando’s flexible RONDEL delivery system is not a single drug, but rather a platform that has the potential to lead to many therapeutics in oncology and other indications. We believe that Calando is well positioned to enable a potentially large and robust RNAi field.

Calando presented interim data from its Phase I clinical trial at the 2010 American Society of Clinical Oncology conference, demonstrating that its lead siRNA candidate, CALAA-01, was safe and well tolerated.

We have always believed that one of our major competitive advantages is our access to high quality nanotechnologies and the ability to develop those technologies in consultation with world-class scientists. We expanded this ability by adding to our Scientific Advisory Board former FDA Commissioner and Director of the National Cancer Institute, Dr. Andrew von Eschenbach and Nobel laureate Dr. Lee Hartwell.

Unidym continued work with existing partners and expanded into new markets via an agreement with Guardian Industries. Guardian is a major manufacturer of glass products for solar energy and electronics applications, and this partnership represents an expansion of target market opportunities for Unidym.

Unidym announced a series of out-license agreements to expand the use of its broad carbon nanotube intellectual property for applications in military and aerospace markets. These are non-core markets for Unidym, so the agreements provide upside exposure without increasing costs or negatively effecting Unidym’s ability to capture value in its focus areas.

The first carbon nanotube-enabled touch sensitive MP-4 players were featured at the 75th China Electronics Fair manufactured with Unidym’s proprietary transparent conductive films.

Former President of Rice University, Dr. Malcolm Gillis, joined Unidym’s Board of Directors.

Minority-owned subsidiary Nanotope, Inc. published data in the prestigious journal, Proceedings of the National Academy of Sciences, demonstrating the ability to regenerate cartilage in accepted rabbit models. This represented another market in regenerative medicine that Nanotope believes it will be able to address in humans with its core platform technology.

Minority holding Leonardo Biosystems, Inc. received $2.5 million from the State of Texas Emerging Technology Fund to continue development of its novel multi-stage drug delivery platform.

Arrowhead rejoined the Russell Microcap Index.

Arrowhead presented at multiple investment community and industry conferences, describing our model and each subsidiary.

We made continued progress financially by decreasing our burn rate and making our cost structure more flexible without compromising our ability to build long-term value.

The first six months of the year represented a record of steady progress, but we were not finished. We viewed these accomplishments as a basis on which we could build durable value for our shareholders. Nothing we had achieved was by accident, but was the result of a long-term strategy and many quarters of deliberate and hard work. By June, we were already focused on the next phases of that roadmap.